SaaS Growth Strategieshttp://sixteenventures.com
Lincoln Murphy's Marketing, Sales, and Customer Success Thought LeadershipSat, 01 Aug 2015 05:57:51 +0000en-UShourly1http://wordpress.org/?v=4.2.3http://feeds.feedburner.com/SixteenVentures?format=skin32.787629-96.799413SixteenVentureshttps://feedburner.google.comDesired Outcome is a Transformative Concepthttp://feedproxy.google.com/~r/SixteenVentures/~3/XfbaiDYFfzU/desired-outcome
http://sixteenventures.com/desired-outcome#respondWed, 29 Jul 2015 15:28:47 +0000http://sixteenventures.com/?p=5773One of the most powerful concepts I’ve ever come across in business is the idea of the customer’s Desired Outcome. And if you’re thinking “one of the most powerful concepts in business” seems like a pretty hefty charge, you’re right; this concept has transformational properties. When I first introduced Desired Outcome, I explained that this […]

Quick Refresher on Definition of Customer Success

First, remember that when your customers achieve their Desired Outcome through their interactions with your company, that is customer success.

And the process used to proactively ensure your customers achieve their – or to orchestrate – Desired Outcome, is what we call Customer Success Management. That is both a function within an organization and software product category (like Gainsight).

Desired Outcome has Two Parts

The two parts of Desired Outcome are: Required Outcome and Appropriate Experience

In the original article on Desired Outcome I went into detail on how to think about the two parts, but as I’ve been traveling around the world and sharing this concept with my clients and at conferences I could tell there was still a disconnect.

But it was at a private event in Toronto where I keynoted and facilitated a workshop that I finally hit on how to best describe the two parts of Desired Outcome… and I want to share it with you.

This is so awesome… here we go.

First Part: Required Outcome

Required Outcome is the job to be done, the thing your customer is trying to accomplish; it’s what gets you in the game. If you can’t help them achieve this, that’s a total non-starter.

This is where a lot of companies focus, especially in the early days (see the MVP example in the original article).

Okay, cool… your product helps them achieve the required outcome; great. But can the required outcome be achieved any other way than your product?

For most (seriously, most) products, the answer is absolutely yes.

Whether it’s a commercial competitor, open source software, DIY project, or manual labor, the thing the customer needs to get done can probably be achieved in myriad ways.

Which is why we need the other side of the equation…

Second Part: Appropriate Experience

Required Outcome – no offense to it – is really nothing without Appropriate Experience.

Anyone can slap together some features and functionality that could help someone achieve their Required Outcome and call it a “product” (and many do!)… but if it doesn’t help your customer achieve that Required Outcome in the right way – the way THEY want or need to achieve it – then you failed to deliver the appropriate experience.

Appropriate Experience is your differentiator; it’s why you exist. It’s why customers choose you over the next best alternative.

Appropriate Experience is – BTW – just that; appropriate. It doesn’t mean Awesome, Modern, Great, or Rich… if you’re selling to tech startups, you might be okay launching with just an API. As you move beyond early adopters, you may need to build a UI to provide that new cohort of customers the appropriate experience.

And that’s why I say “through their interactions with your company” in the definition of Customer Success, rather than “through your product.”

Desired Outcome is the Secret to Success

One of the really interesting things about Desired Outcome – and why it’s so powerful – is that if you only help the customer achieve the Required Outcome, they may not feel “successful.”

Or like when I get off of a Southwest Airlines flight and complain to myself as I walk down the jetbridge to the terminal about the horrible experience; cramped seats, no wifi, and no assigned seating so I couldn’t get any work done. Obviously they met my required outcome – get me from Point A to Point B safely – because I’m able to complain, but otherwise I 100% of the time don’t feel like flying on Southwest was “successful.”

But I’m not the Ideal Customer for Southwest… the person getting off the plane behind me who is going on a vacation and was looking to save money in the process may feel like it was a great experience and wonder why I look so unhappy and am mumbling swear words to myself. That person is their Ideal Customer.

If you use a “bare bones” app that someone hacked together and it gets the job done but the UX is pretty rough, do you feel successful? Do you want to continue to use it? Are you going to tell the world they should use it? No. Even though it did what you required it to do.

Eventually you may need to have a full-blown suite of products with a rich UI; but that’s a function of who your customer is and their Desired Outcome.

]]>http://sixteenventures.com/desired-outcome/feed0http://sixteenventures.com/desired-outcomeThe Seeds of Churn are Planted Earlyhttp://feedproxy.google.com/~r/SixteenVentures/~3/Bo8xniw6myM/seeds-of-churn
http://sixteenventures.com/seeds-of-churn#respondTue, 28 Jul 2015 17:48:54 +0000http://sixteenventures.com/?p=5753“The Seeds of Churn are Planted Early” is a phrase I came up with in early 2013, published shortly thereafter, and have said and used many times since. I wanted to go on record with that – BTW, if you see the term’s use outside of my work or that of Gainsight’s, maybe send them this […]

]]>“The Seeds of Churn are Planted Early” is a phrase I came up with in early 2013, published shortly thereafter, and have said and used many times since.

I wanted to go on record with that – BTW, if you see the term’s use outside of my work or that of Gainsight’s, maybe send them this link – but I also wanted to give the origin story of this powerful Customer Success concept.

It was late December 2012 when the CEO of a startup that had a major churn problem contacted me.

They were losing far more customers than they were bringing in – and they were bringing in a lot of customers – and he knew this was clearly not sustainable; I could tell he was worried.

Developing a Churn Hypothesis

Before I flew out to meet with them, I asked them to send over a bunch of data – including exit survey results – as well as for them to answer a bunch of questions.

After preparing for our time together by reviewing the data and their answers to my questions, I had a pretty good hypothesis of what was going on.

That hypothesis became much stronger when one of the guys that greeted me at the door was wearing a “we send email, you make money!” t-shirt!

That was their tag line – “we send email, you make money!” – and, well, it just wasn’t playing out like that for pretty much every customer.

Churn seeds are usually planted early – often during the sales process, especially when trickery is used – but they may take time to sprout

Ideal Customers Can Still Churn

This company knew who their Ideal Customers were, targeting a very specific band of customers across a handful of verticals who they knew were already using an email marketing system.

Chances are, if you’re using an email marketing system you know of the potential value of email marketing so education isn’t required… but, also, chances are you’re not getting the value out of it (since most companies don’t) so poaching customers from existing do-it-yourself solutions wasn’t a problem.

And to do that they had a very large group (20+) of outbound sales reps… these weren’t Sales Development Reps (SDRs) or Business Development Associates (BDAs) that would source the lead, maybe do some qualification and set an appointment; these were closers.

They smiled, dialed, got the prospect on a demo right then, and closed the deal… all in one call (they used a nifty little join.me trick to expedite the process).

Completely Mismanaged Expectations

Yes, it was a fairly aggressive outbound sales approach, but it worked; primarily because they were selling what every small business wants; customers. Or, more specifically, sales.

If we’re honest – and marketing or sales method/modality aside – we really just want to buy revenue.

At the same time, while it was aggressive, they weren’t being nefarious or trying to pull one over on the prospects… they honestly believed that if they sent email on behalf of the customers to their mailing lists, given the way the system worked, their customers would make sales.

It’s just that it didn’t work like that and customers were churning; even though they were “active” in the system. They actually had a fairly robust customer onboarding process and customers were adding contacts to the system on a monthly basis (they integrated with a company that would send a box every month to collect business cards, digitize them, and automatically upload to their account), so they were “active.”

But while they were “active” (it’s difficult to know how meaningfully active a customer or user is in a somewhat passive product like this), they certainly weren’t achieving their Desired Outcome; a Desired Outcome which had inadvertently been shaped by their complete mismanagement of expectations in the sales process!

Look, the customers weren’t being unreasonable in saying “you sent an email, I didn’t make money. I quit.” because, well, that’s what they sold.

Diagnosing Customer Churn; Starting at the Sales Process

So we started going through their sales process together and they said “Lincoln, we have a churn problem, not a sales problem, can we focus on the end-of-life issues we brought you here for?”

Yowza… so I said back to that – ever so eloquently – “the seeds of churn are planted early, my friend” … and then I went on to explain that churn is not an end-of-lifecycle issue, it’s a LIFECYCLE issue; meaning it can be caused during – and happen at – anytime in their customer lifecycle.

The Seeds of Long-Term Success Are Planted Early, Too.

And just so I don’t come off as incredibly glass-half-empty pessimistic – and I have to give a major hat tip to my friend Micky Deming from Kahuna Accounting and the TREPX Entrepreneurial Community for bringing this up – but the seeds of churn aren’t the only thing that can be planted early.

The early days of your relationship with your customer are critical; whatever analogy you want to use (planting seeds, laying a foundation, etc.), just know that whatever happens in the first stage of engagement (a period of time that’s unique to your situation) really does impact the long-term growth of your customer as a customer.

So along with “churn seeds,” the seeds of Massive, Long-Term Success are planted early, too.

It’s maybe harder (though not impossible) to measure that a great onboarding experience directly resulted in the customer staying longer and expanding their use (and the revenue generated from that customer) over time in the same way we can quantify the effects of a poor onboarding experience with churn, but that doesn’t mean those “success seeds” aren’t being planted.

Always remember that Customer Success starts at the first point of contact with the customer and continues across their entire lifecycle… if done correctly, that lifecycle should be much longer than it otherwise would be (more profitable, too!).

]]>http://sixteenventures.com/seeds-of-churn/feed0http://sixteenventures.com/seeds-of-churn5 Situations When Massive Churn is Just Finehttp://feedproxy.google.com/~r/SixteenVentures/~3/zL1_1POU1FI/churn-is-fine
http://sixteenventures.com/churn-is-fine#commentsWed, 08 Jul 2015 06:20:20 +0000http://sixteenventures.com/?p=5662The mantra of “grow at all costs” – that seems to include acquiring wrong-fit customers (those who aren’t your Ideal Customers), churn be damned – has popped up several times lately and my reaction to it is two-fold. First, I immediately thought how stupid this is and how it flies in the face of everything […]

]]>The mantra of “grow at all costs” – that seems to include acquiring wrong-fit customers (those who aren’t your Ideal Customers), churn be damned – has popped up several times lately and my reaction to it is two-fold.

First, I immediately thought how stupid this is and how it flies in the face of everything that has to do with customer success and what I’ve been preaching for the last few years, but also goes against the core fundamentals of building a high-growth business (of which not losing more customers than you bring in is kind of important).

But then I thought maybe this could be a fun thought experiment where we can explore five situations where having high churn is actually just fine… in fact, it’s totally acceptable.

Cool, let’s do this.

A small caveat before we get into this list, though; the chances are – and I mean these are really good chances, statistically speaking – none of this applies to you. So use caution.

Okay, let’s dive into the list…

5 Situations When Massive Churn is Just Fine

I came up with 5 for this list, but I’m sure there are many other examples feel free to share those in the comments below.

Example 1: You Have a Legitimately Massive, Transient Market

If you have a product where the market of potential users and customers is legitimately massive and you know that those users and customers come and go and that’s just the way it is perhaps having a high churn rate in this market is just the way things will be.

And what I mean by a massive market is literally something that everybody with an Internet connected device is a potential customer, everybody that uses an iPhone is a potential customer, everybody that has a job is a potential customer, everybody that eats food is a potential customer, etc. Those are massive markets.

But just having a massive market doesn’t mean that churn is a good thing, the other part of this is the transient aspect.

Some markets have customers and users that come and go in a fashion one might describe as willy-nilly.

In a transient market, churn is expected because customers change their minds frequently, their situations change and they have to lower costs and then they get more money and they come back, trends change, fads come and go, and customers use and stop and come back and it’s just this perpetual churn machine that is the reality. That’s my definition of a “transient” market.

If you are in a legitimately massive market and there is a transient nature to that market, then churn might not only be the reality on the ground, it might be just fine because when customers leave, they probably come back. And when they leave, it’s probably not due to anything you did so they probably won’t badmouth you on the way out.

But again, I have to remind you that you probably don’t fit into this category!

Example #2: You Are Your Competition

Two examples of “you are your competition” that immediately come to mind are web hosting roll-ups like EIG and restaurant groups like Yum! Brands.

EIG owns HostGator, Bluehost and a ton of other “hosting brands” … but this is not exactly common knowledge. Which means, when a customer has a negative experience with Bluehost, for example, they search or ask friends for alternatives and they find HostGator. This means customer churn for Bluehost, a new customer for HostGator… but who cares. It’s all in the same family for EIG.

Yum! Brands owns Taco Bell and KFC (among other brands)… so when I swear off Pizza Hut (again) and decide to go back to Taco Bell for my dinners this week, that’s a customer gone from Pizza Hut (for now; see #1 above) and a new customer (well, I’m not new… just back) for Taco Bell, but Yum! is the real winner.

SaaS companies do this, too, when they roll-up their low-end (flailing, generally) competition. While the smaller competitors are usually purchased for their revenue or to keep around as additional distribution/lead gen/down or upmarket expansion, sometimes they just keep the competitors around as “alternatives” for churning out customers to go to.

As with example #1 above, I feel the need to remind you that you probably don’t fit into this category. I have seen some relatively small SaaS companies acquire their even-smaller competitors, though, so even if you’re a smaller, bootstrapped company, this isn’t outside the realm of possibility for you… but statistically speaking, you probably still don’t fit into this category.

Example #3: You’re Going to Buy your Competition

Just like in example #2 above, if you can buy your competitors then you know when your customer leaves, they’ll just go there and – eventually – they’ll be back under your profit umbrella.

But, if you’re planning to buy the competitor(s) you’re losing customers to, you might want to do this sooner rather than later since every customer you lose to your competition means that competitor is going to be worth more when it comes time to buy.

Also, I’d be remiss if I didn’t remind you that as your customers churn out and go to your competition, that affects how investors see your company and could impact – if not your ability to raise the infinite funds available out there – high churn will certainly affect how your company is valued by investors and the cost of that investment (i.e. their equity stake), or a nice combination of both.

All of that could then impact your ability to buy the other company who is now more expensive because they now have your customers and their associated revenue.

And just as with examples #1 and #2 above, you probably don’t fit into this category so high churn is not something you can have and expect to thrive. It just isn’t.

Example #4: You’re Going to Outlast your Competition

You’ve got more money in the bank, you’ve got investors on the hook for additional funding, you’ve got lines of credit on the ready, you’ve got all the world of oysters at your fingertip… and your competitors don’t. Cool.

And as for your nearest competitors, you know their funding level and current runway, you know their pipeline, you know everything that’s going on in your major competitors world and you’re very confident they’ll start dropping like flies.

At some point in the very near future your competitors are going to go out of business and their customers will have no choice but to come back to you, so who cares what your churn looks like right now; you’re in a great position and they’re not.

You can wait them out… so it’s no big deal.

If this is the case for you fantastic you’re in an enviable position; I wish you nothing but the best of luck, though clearly you don’t need it. However, just like examples 1, 2, or 3 above… you probably don’t fit into this category so high churn is definitely not a good thing for you.

Example #5: You Can Spend to Offset the Negative Market Sentiment

When customers leave, if you’re not in the type of market listed in example #1 above, they typically leave with a bad taste in their mouth.

Word-of-mouth is the type of thing that spreads bad news fast – which, as I said before, is generally because the bad experience they had with you is the ONLY remarkable thing they’ve ever experienced in their relationship with your company – and now not only do you have a churn problem, but they’re spreading the bad news, potentially limiting your ability to land new customers.

Now if you have enough money – and the marketing and PR machine that is powered by those funds – to offset the negative market sentiment that comes along with the high churn (churn that is obviously caused by not focusing on customer success or some other thing that’s in the favor of your customers), then you might be just fine.

But if that’s not you and just like in examples one, two, three, and four above it’s probably not you, then high churn is something you need to avoid.

Reality Check: Churn is Always Bad

The 5 cases above are only a few where – I suppose – the case could be made that having a high churn rate isn’t horrible. But even then, if someone were actually giving me one of those examples, I’d push back and say it’s still bad to have high churn.

In fact, even in the first example where you have a “transient” market, I bet some of that churn that you see as inevitable is actually preventable; but the inevitability of it has caused you to stop looking for ways to mitigate the churn, so it continues to occur.

You just can’t see the root cause forest because of the inevitability trees.

when you see churn as inevitable ("that's just the way it is in THIS market"), you stop looking for the root cause and ways to stop it

Considering all the ways churn hurts a company, there doesn’t seem to be any reason – even if you happen to fall into one of these five categories – that you should sit back and just accept churn as either inevitable or a good thing.

Unless you fall into one of those categories, high churn is a big problem.

]]>http://sixteenventures.com/churn-is-fine/feed6http://sixteenventures.com/churn-is-fine5 Lesser-Known Ways Churn Hurts your Companyhttp://feedproxy.google.com/~r/SixteenVentures/~3/jFVEPPVCgtY/churn-hurts
http://sixteenventures.com/churn-hurts#commentsWed, 08 Jul 2015 05:52:08 +0000http://sixteenventures.com/?p=5658The common refrain by SaaS experts that think business is just a math problem is that if a customer stays long enough to pay back the cost to acquire them (the metric is called Customer Acquisition Cost or CAC), they became a “profitable” customer (“unit economics” don’tcha know) and everything is great. Just do more of […]

]]>The common refrain by SaaS experts that think business is just a math problem is that if a customer stays long enough to pay back the cost to acquire them (the metric is called Customer Acquisition Cost or CAC), they became a “profitable” customer (“unit economics” don’tcha know) and everything is great.

Just do more of that and you’ll be a unicorn.

But the fact that your customers churned out – even after becoming “profitable” – likely means you didn’t get all the value you could from them and they definitely didn’t get all the value they should have from their relationship with you (you didn’t help them achieve their Desired Outcome).

Those customers you paid to acquire – that your company put time, energy, resources, and money into acquiring – are leaving, and there’s a cost that comes along with that that you might not have considered.

Let’s explore this, shall we?

I know this might sound crazy, but there’s more than just a dollar cost associated with acquiring those customers that aren’t a good fit for your product or service; there are emotional and other intangible-but-valuable-resource tolls associated with that churn that negatively affect your business.

Churn hurts revenue – obviously – but have you considered these…

5 Lesser-Known Ways Churn Hurts your Company

I came up with 5 ways for this list, but I’m sure there are other situations where this applies, so feel free to share those in the comments below.

1. Churn Hurts Your Company Valuation

When you have high churn, potential investors or acquirers will apply what amounts to an arbitrary “discount” (some refer to it that way, some don’t… but that’s what it is) to your company valuation.

This could be due to a lack of faith on their part because something is clearly wrong with your business or your ability to lead, or it could simply be a way to get a better deal for them and their investors.

Remember, investors that are using other people’s money (VCs, institutional investors, corporate acquirers) are in the business of producing the biggest return possible for their investors and stakeholders so they will look for every reason to get the best deal possible.

This isn’t bad; it isn’t good… it just is.

And just so I don’t come off as too negative, sometimes this works in your favor if your business/sector is smokin’ hot and just being in the deal – even at a premium – might be enough to ensure (in theory) a great return.

Either way, just know going in that high churn (regardless of all the other great stuff) is a lever for them to pull to make the deal better… for them.

2. Churn Hurts Your Total Addressable Market

One of the reasons people (investors, buyers, etc.) might cite for “discounting” your company due to high churn is the simple notion that a churned customer is no longer part of the Total Addressable Market.

Where you’ve stated that your Total Addressable Market is “Restaurant chains with > 5 locations in North America” the reality is that it’s that MINUS the customers you already had that bought and bailed.

If you’re churning customers faster than new customers are entering the market, your TAM is shrinking.

Churning and burning customers just isn’t gonna fly any more, so you might consider getting deliberate and building your Ideal Customer Profile from Day 1 (you can always pivot, but this will ensure you don’t go too far down the wrong path).

3. Churn Gives your Competitors a Weapon

A customer churns out (or doesn’t renew) and goes to the competition; you think they won’t tell your competitor where they’re coming from and why they left? You couldn’t be more wrong.

There’s even some psychology at play there (detailed in Dr. Robert Cialdini’s book Influence) that actually dictates that they’ll do things that are consistent with – and enhance – the decisions they made to leave you.

So even if their experience with you wasn’t horrible, the more they talk about it and the more they re-live it, the more “horrible” it will become to them… and they’ll be reliving it with your competitor.

And your competition will bring these up with new prospects “XYZ company dropped that other product for our’s because of this, this, and that reason” … and since this is so valuable to your competitor (meaning they’ll really push for it), and their new customer is still in the consistency-and-commitment phase of their decision to move away from you, they’ll be willing to talk to new prospects of your competition against you.

It doesn’t take very many churned customers to give your competition a ton of firepower in their sales process.

Protip: you should probably find out if your competition is doing this and know how to 1) respond (“we had some missteps in the early days, but after time in market and helping x number of customers [achieve their desired outcome], we know what types of customers can be successful and we only work with those.”) and 2) turn the tables on your competition if need be. I hate stuff like that, but if they’re doing it… well, don’t just take it.

4. Churn Hurts Your Goodwill and Market Sentiment

Building on #3 above, your former customers don’t just tell your competition, they tell their colleagues at work (who’ve probably seen the fallout first hand), their peers in networking and professional groups, they leave reviews online, share war stories in online forums or LinkedIn groups, or answer anonymous (leading, probably asked by your competitor) questions about your product/company/pricing/etc. on Quora.

People that move on from the company that was your former customer leave that company with the bad taste of your product in their mouth and when they go to a new company, they bring that bad taste with them. When that company pops up on your radar as a lead to reach out to, you have a built-in obstacle to overcome now.

And all that hurt goodwill and negative market sentiment is the gift that just keeps on giving, because…

5. Churn Hurts Your Employee Morale

It’s not fun to work hard to get customers, to close deals, to do marketing, to onboard customers, or to support and serve customers that aren’t a good fit.

Frankly, it sucks to work for a company that has a lot of negative stuff being said about them, their product(s), their leadership, etc.

Yeah, it’s great to get a paycheck, but it’s also good to be proud of where you work… and companies that churn and burn customers – at least in my experience – tend to churn and burn employees (and very often leaders), too.

It’s hard to maintain a positive culture surrounded by constant negativity. It’s even harder to maintain a hypocritical culture where you claim to be customer-centric but have high (avoidable) churn.

And rest assured… employees that have to exist within that hypocritical culture won’t for long.

So yeah… churn can have a very real cost on your company beyond the simple math that says less revenue equals a lower valuation.

]]>http://sixteenventures.com/churn-hurts/feed3http://sixteenventures.com/churn-hurtsPodcast: Getting Inside the Minds of Your SaaS Customershttp://feedproxy.google.com/~r/SixteenVentures/~3/s-p4Ll7kE-k/inside-minds-of-saas-customers
http://sixteenventures.com/inside-minds-of-saas-customers#respondTue, 07 Jul 2015 07:56:34 +0000http://sixteenventures.com/?p=5711How do you define success for your SaaS customers? While it sounds simple, it’s not. Success is only achieved when your customers reach their Desired Outcome by their interactions with your company. But first, you have to understand what it is that your customers want to achieve — and that can take some work. I […]

Success is only achieved when your customers reach their Desired Outcome by their interactions with your company.

But first, you have to understand what it is that your customers want to achieve — and that can take some work.

I was recently a guest on the business analytics podcast, Million Dollar Insights, and I spoke with host Cara Hogan about how SaaS companies can begin to define and invest in customer success, from identifying an Ideal Customer Profile to reducing churn.

If you want happy, engaged customers who rave about your product, you should take a listen.

Listen to the episode now:

In this 30-minute episode, we discuss:

Why tracking usage metrics is useless

How you can drive down churn before it gets out of control

How you find and then target your ideal customers

If you’re just getting started with customer success or re-focusing your efforts on your customers, you should listen to the newest episode of Million Dollar Insights.

]]>http://sixteenventures.com/inside-minds-of-saas-customers/feed0http://sixteenventures.com/inside-minds-of-saas-customersThe Fiction that Friction Improves Customer Onboardinghttp://feedproxy.google.com/~r/SixteenVentures/~3/BQlvHNb-nIY/friction
http://sixteenventures.com/friction#respondThu, 02 Jul 2015 22:53:56 +0000http://sixteenventures.com/?p=5649A few months back an article was published that talked about how this popular brain training game (I can’t remember what it’s called) made their onboarding process MORE complex – not less – and increased their active users by 10%. While the article was very clear on when to add friction, most of the discussion […]

]]>A few months back an article was published that talked about how this popular brain training game (I can’t remember what it’s called) made their onboarding process MORE complex – not less – and increased their active users by 10%.

While the article was very clear on when to add friction, most of the discussion around the article that I saw fell into the category of “yes, that’s brilliant! I hate my users and customers anyway, so I’ll add MORE friction to our onboarding and we’ll improve like crazy!”

Crazy is the right word… but the context is wrong.

What they should have said was “I’d be crazy to simply add friction and think for a second that the outcome would be in some way positive.”

Unfortunately, this idea of adding friction has come up a few times recently with at least one client and on a few Clarity calls, so I feel the need to dig into why adding friction all willy nilly is simply one of the stupidest things you could do.

But some people think we just…

Gotta Make ’em Jump Through Hoops

If you make your prospects jump through hoops to use your product, they’ll be more dedicated, right?

They’ll be more “invested” – they’ll have more skin in the game (OMG I hate that term) – and because of that they’ll magically become a long-term paying customer because that’s how things work in your make believe world.

That’s not how things work in reality though. Sorry.

However, while simply adding steps – friction, hoops to jump through, game within which to invest skin – is a losing proposition, doing things that get the customer or user more engaged is always going to be a winning proposition.

Simplify the Process of Achieving Value

Nowhere in any thing I’ve written, talked about, or the work I’ve done with clients have I ever said you must always reduce the number of steps a customer has to do to get value from your product.

In fact, sometimes you do need to add steps. But it’s not some arbitrary addition of friction into the mix.

I have always said you should reduce the number of unnecessary steps and simplify it as much as possible, but simplification doesn’t mean the number of steps gets reduced.

In fact, it happens quite often that, in order to simplify the process of getting the customer to first value delivered – to that point where they either achieve real value for the first time with your product or see that it’s actually possible – we have to increase the number of steps.

Think about this… sometimes you sign-up for an app and there’s just two or three steps to get started and you’re like “this sucks” and “why do they need that?” in addition to lots of swearing.

But you’ve also experienced apps or services (more likely the latter since they’re less likely to fall into the “we’re software!” trap), that took you through 17 steps but it was engaging, and you felt like each form field you filled out was going to make your experience even better.

It may be hard to remember the latter and that’s kind of the point, right? (Yes, that’s kind of the point.)

The truth is…

Sometimes More is Less

Sometimes we add more fields or ask for more information and we – gulp – actually try to improve the UX around that to soften the blow and drive engagement. Even when you’re trying to add friction just to get people to jump through those hoops, you may catch yourself inadvertently adding elements to improve the experience.

That’s not a bad thing at all!

In fact, you might even add some marketing elements to it to get people to fill out the form and give you more info. When that happens, the takeaway is often reduced to “we added more form fields and increased signups” but the truth is more nuanced than that.

The reality is simple; if you didn’t design the process to be better and it just happened to turn out that way, then that change was caused in spite of your efforts… not because. And that’s a hard way to grow.

So treat your signup form like the marketing page it should be and continued the marketing (value prop) narrative through the entire process of customer onboarding. When you do you’ll see increased signups and more Free Trial conversions.

It’s so simple; good things happen when you…

Improve Your Customer’s Experience

Adding contextually appropriate steps doesn’t equal friction, but actually improves their experience by quickly customizing the product or moving them down the right path and gets people engaged in the product quickly and deeply,

But just adding friction for the sake of adding friction makes zero sense. But man, it sure gets people to click on headlines.

Lumosity. That’s the name of that… ummm… game. It’s a game. And here’s the link to that article that I talked about at the top. Now that I made you jump through so many hoops to get to that link, if the logic holds, you should become an avid reader of that blog.

]]>http://sixteenventures.com/friction/feed0http://sixteenventures.com/frictionCustomer Psychology and the Wasted Power of Surveyshttp://feedproxy.google.com/~r/SixteenVentures/~3/0eycmWKC0_Q/psychology-of-surveys
http://sixteenventures.com/psychology-of-surveys#commentsTue, 30 Jun 2015 06:06:08 +0000http://sixteenventures.com/?p=5638Surveys can be dangerous if used wrong, but can be super-powerful if used correctly! Whether it’s the Net Promoter System to gauge customer satisfaction, doing pre-launch customer development work for your startup, or one of the myriad methods we use to interact with and learn from our customers, prospects, and other people, surveys are by […]

]]>Surveys can be dangerous if used wrong, but can be super-powerful if used correctly!

Whether it’s the Net Promoter System to gauge customer satisfaction, doing pre-launch customer development work for your startup, or one of the myriad methods we use to interact with and learn from our customers, prospects, and other people, surveys are by far the easiest implement and most effective feedback mechanism at scale.

The problem with surveys, aside from all the ways that people generally mess them up (too many questions, leading the witness, not specific enough, poorly targeting / segmenting the audience, etc.), is that the underlying psychology of surveys is rarely taken into consideration.

And some of that studying led me to realize that many of the behaviors we employ around surveys – especially in the Customer Success world with the use of NPS surveys – can have a very negative impact that does the exact opposite of what we’re trying to do.

In this article I explore how we use surveys and suffer the often-unintended consequences.

Now, I’m sure there are edge cases that don’t fit one of these categories or ways to get much more granular, but in my experience there are…

Three Use Cases for Surveys

If we look at surveys from a high-level, there are really only three things reasons to send a survey:

Learn things you don’t know

Validate your assumptions

Get the recipient to validate and recommit to their beliefs

The first two use cases – learn things you don’t know and validate your assumptions – are relatively self-explanatory so I won’t spend any time on those.

But the third use case is less well-known and interesting as it’s both incredibly powerful but dangerous if misused.

And a lot of people accidentally and unknowingly fall into the third use case while trying to solve for the first two.

Let me explain by starting with….

Cialdini’s Principle of Consistency

In fact, we can look at my wallet-sized card (that I got from the Influence at Work folks) for the definition of the Principle of Consistency: “Once people make a choice/take a stand, they will encounter interpersonal pressure to behave consistently with what they have previously said or done.”

Most marketers use the concepts posited by Dr. Cialdini as a way to elicit certain behaviors from their customers, which is valid.

But most marketers (and Customer Success people) would be wise to really understand what’s going on with these principles and how misusing them can have the exact opposite effect of what we’re trying to achieve!

For instance, when I talk about customer onboarding with my clients, I often talk about the Principle of Consistency.

This very simple-yet-powerful idea that once you do something or state your intention to do something, your next behavior will most likely be in-line with what you already committed to or have done.

And the reason this happens has nothing to do with how likely we are to stick with commitments we made, our willpower, or how good of a person we are.

These Principles of Persuasion, Consistency being one, are powerful because our brains are wired to work in this way; they happen outside of our conscious effort and whether we know they’re happening or not.

So because this isn’t a choice or just how we operate, it’s just the way our brains work, if we do the wrong thing or something that is incongruent with the positive outcome that we want from our customers, the principle still kicks in!

We don’t get to pick and choose when these principles work, so you have to be very careful out there.

Let’s explore how this applies to…

Surveys with Customer Success in Mind

When we send a survey – NPS or otherwise – asking about someone’s experience when they had a bad experience, it might seem good because we learn about their experience, we give them a place to vent, etc.

But the reality of the situation is, if they’re upset and they get to voice and otherwise re-commit to that negative belief around your product or service in a way maybe they hadn’t done to date, we may be enabling consistency where we otherwise don’t want it to be.

So while surveying the customer and finding out that they’re unhappy is good if we didn’t know that going in (definitely one of the valid use cases for surveys), you can still lead them down a path of being of acting consistently with that negative view of your company product or service.

From a Customer Success standpoint, we should know that a customer isn’t in a good place and simply not send a survey asking how they like our product or service and if they’d be willing to tell a friend. Makes sense, right?

It’s simple…

Don’t Knowingly Survey Unhappy Customers

Knowingly surveying a customer that is not achieving their Desired Outcome or is otherwise unhappy is a recipe for disaster as you activate the Consistency principle around that negativity.

And since you already know they’re not successful, you’re not trying to learn something you don’t know… so why are you surveying them? Right.

So never send a survey asking if they would recommend you to a colleague if you know they wouldn’t. Ever.

Don’t get me wrong, though… you absolutely should contact unhappy / unsuccessful customers to help them get back on track toward success, it’s just that a survey is not the right approach. Just reach out and help them.

Okay, so that said…

If you Don’t Know, Survey a Small Cohort

While the damage may occur by surveying customers who are unhappy, if you don’t know that they’re unhappy and have no other way of determining that outside of the survey, then you have to do it. That’s a valid use case for a survey.

But you still need to be careful.

You might try surveying a subset of customers and looking for patterns with those who said they aren’t happy.

Then go back and identify customers that share those same characteristics and, instead of a survey, reach out to help them achieve their desired outcome.

You went from not knowing to knowing by surveying only a few customers – and invoking the Principle of Consistency with those few people – but once you knew, you didn’t need to survey anymore.

No matter what, I encourage everyone who conducts surveys for marketing, Customer Success, or whatever, to really understand…

The Psychological Impact of Surveys

The power of Consistency in surveys is really interesting.

Surveys can introduce new ways of thinking about a subject by way of phrasing the questions and then activate consistency on that new way of thinking.

Some companies use surveys in the sales process to gather and share insights with prospects. This helps start a conversation while also activating the principle of consistency.

If you understand the three use cases and the underlying psychology of surveys – especially around Cialdini’s Principle of Consistency – you can actually turn your surveys into a Growth Hack and make your customers successful (and happy).

One of the ways you can do that is to…

Use Surveys to Reinforce Positive Feelings

I said not to survey customers that you know were not happy. On the flip side you absolutely want to survey customers who are achieving their Desired Outcome.

In fact, the best time to send an NPS survey – at least from my point of view, which isn’t completely aligned with NPS purists – isn’t just after any interaction with your company or a timed interval, but once they’ve achieved success milestone with your product.

Yes, your results from an NPS survey will be skewed towards the positive and I know that flies in the face of NPS dogma, but it does amazing things to get the recipient to validate and recommit to their beliefs!

And when they come back and say there will absolutely be a promoter for you, close that loop and get them to take an action to be an advocate for you, to spread the word to invite their friends or colleagues and you just created a growth hack around your NPS survey.

There absolutely are reasons to send a survey when you already know the answer; it’s about reinforcing what the recipient already believes.

Remember, taking some time to understand psychology and how our brains work can massively improve your Customer Success and Marketing efforts.

]]>http://sixteenventures.com/psychology-of-surveys/feed4http://sixteenventures.com/psychology-of-surveysHow Social Proof Actually Works in Marketinghttp://feedproxy.google.com/~r/SixteenVentures/~3/vOIzhzm-fLI/social-proof
http://sixteenventures.com/social-proof#commentsWed, 24 Jun 2015 17:09:43 +0000http://sixteenventures.com/?p=5602I’m not a psychologist, but I play one every day as I try to figure out why people (users, customers, visitors, etc.) do what they do… and how to get them to do more of what I want them to do. I spend a lot more time reading books about – and otherwise studying – human […]

]]>I’m not a psychologist, but I play one every day as I try to figure out why people (users, customers, visitors, etc.) do what they do… and how to get them to do more of what I want them to do.

I spend a lot more time reading books about – and otherwise studying – human psychology and the way our brains operate, than I do on specific marketing techniques, growth hacks, or the latest viral sensation.

Those things are fleeting, but the way our brain works is much slower to change.

One of the people I’ve learned the most from when it comes to human behavior is Dr. Robert Cialdini, starting with his game changing book Influence. He and others from his Influence at Work group have released other books that provided real-world examples of how to leverage the principles of Influence – or avoid them – but Influence is still my go-to resource.

Dr. Cialdini has posited that there are six principles of persuasion – Reciprocation, Liking, Consensus, Authority, Consistency, and Scarcity – each of which has the power to elicit certain behaviors (simply due to how our brains work) in those at whom the principle is focused.

In this article I want to explore the Principle of Consensus, otherwise known in marketing as “Social Proof” and in Customer Success as “Advocacy.”

Generally when we think of Social Proof we think of…

A person wearing nice clothes crossing the street against the light, so you follow her (she must know what she’s doing… she’s dressed so professionally).

A group of people looking up in the sky… so you look up, too.

9 out of 10 Dentists prefer…

The number of Retweets, Likes, or Repins a piece of content gets on the various social networks.

The number of backers on Kickstarter

This many other readers highlighted this section in a Kindle ebook

A hit counter on your web page (for those of you joining us from 1996)

But when we’re marketing B2B SaaS and software products, the proof isn’t in the pudding (or any of those things on the list above), it’s with others who have used – or can vouch for – your product.

Social Proof and The Principle of Consensus

That sounds like a fantasy genre book title.

Anyway, according to my wallet-sized Principles of Persuasion card I got when I spent some time with the Influence at Work group in Phoenix a while back (that I carry with me everyday because I’m just that awesome), Consensus is when “people decide what is appropriate for them to do in a situation by examining what others are doing.”

The card goes on to say that Consensus is ACTIVATED by evidence of how others are thinking, feeling, or acting.

It also says that Consensus is AMPLIFIED by evidence from many others, similar others, and by uncertainty.

Every Principle of Persuasion has Amplifiers; things that, when they happen, markedly improve the effectiveness of the principle, but let’s talk specifically about…

Social Proof Amplifiers

Of the three amplifiers of Consensus, similarity and uncertainty are the most interesting in the world of B2B SaaS, especially for niche or vertical-focused products.

I’ll discuss similarity in a lot more detail later, so for now I want to touch on uncertainty; such a simple, but incredibly powerful concept.

When we don’t know what to do, we look to others for cues (or sometimes exactly what we should do).

When we don’t know what to do it’s usually for one of two reasons: there are no obvious choices or too many.

If you’re entering a crowded market with your SaaS product, one way to cut through the clutter is to heavily leverage Social Proof.

If you’re creating a new product category (like we’ve done at Gainsight by literally creating the Customer Success Management software product category), you’ll probably need to leverage all three types of Social Proof below at various stages of your evolution.

Understanding Consensus and what activates it – what triggers our brains to react a certain way – and what amplifies this principle, are absolutely critical when it comes to putting these concepts to work.

That’s why I wanted to examine this idea of Consensus as it relates to Social Proof as a marketing technique.

That starts by understanding that there are…

Three types of Social Proof

You can probably get more granular and come up with other types, but in my experience, when it comes to Social Proof there are basically three kinds: Similar, Aspirational, and Endorsement.

Knowing the difference will help you get the results you’re looking for in your marketing.

On the flip side, NOT knowing the difference could literally derail your marketing efforts, so it pays to know what you’re doing.

Let’s look at each type in more detail.

1. Similar Social Proof

Social Proof that’s “similar” is when you display the logos of – or testimonials from – customers that are the same as your Ideal Customer.

This is the most basic type of Social Proof and is generally what we think of when we hear “social proof” from a marketing standpoint.

When we display logos of our customers on our marketing websites, if we think about what we’re trying to do at all, it generally falls into the “similar” category, right?

“I’ll put these logos on my site and hope that others like them will contact me or sign-up for our service” you say to yourself.

So you put all the logos on your site without really thinking through the ramifications of that. In fact, you’re quick to add the logo of that giant company you landed because, well, how cool is that, right?

Well, it might not be that cool if your Ideal Customer isn’t like that giant company and thinks, based on the presence of that logo, that your solution – even if it’s right for them – is likely too far out of reach. “If Walmart can afford it, we can’t.”

It is tempting to show off that giant logo you landed, but if that’s incongruent with your Ideal Customer Profile you may scare them away.

When it comes to Social Proof, defining your Ideal Customer Profile is critical so you can leverage Social Proof that’s similar to the customers you really want to land; outliers (and ego-boosters) be damned.

A Quick Note on Viral Expansion

If you’re thinking about your viral expansion opportunities – both intra and inter-company virality – for your product, remember that you’ll be taking advantage of the principles of Social Proof there, too.

Awesome, right? Sure… but just know that virality is almost always horizontal, which means you shouldn’t assume advocacy programs and viral loops will help you land better (more ideal) customers than you already have. It just doesn’t tend to work that way in reality.

If you have less-than-ideal customers advocating for you or otherwise spreading the word, they’ll bring in more like them.

Yet another reason to focus on your Ideal Customer in the first place.

Okay, all of that said, there IS a time and place for displaying logos of companies larger (or more successful) than your Ideal Customers and that’s called…

2. Aspirational Social Proof

Lincoln Murphy and Dr. Robert Cialdini in Phoenix, Arizona

Social Proof that’s “aspirational” is when you display reviews, video testimonials, or logos of companies that your Ideal Customer prospects want to be like.

But let me be clear; aspirational social proof is potentially dangerous as your ideal customers may not get it & think bigger customers mean you’re out of their price range.

This is yet another reason to really get to know your Ideal Customer, understand their Desired Outcome, and then use that knowledge to engage these psychological principles.

If you sell to B2B startups that are post-series A funding, for example, the leaders of those organizations may have aspirations of being $100M (and eventually $1B Unicorns) companies and want to operate as such. They may not need a world-class subscription management platform like Zuora or a world-class Customer Success Management product like Gainsight today, but if they want to be a $100M company, they should act like one.

Knowing that this is your Ideal Customer, you’d show them the logos (and other Social Proof elements) from the companies they want to be like someday… not the companies they’re like today.

But you have to know your Ideal Customer or this could have the opposite effect.

Okay, so what if you’re just starting out and don’t have any “Similar” or “Aspirational” Social Proof to offer? You can use…

3. Endorsements (Celebrity or Otherwise)

When you don’t have customers yet – or don’t have customers that have achieved the necessary success milestones that would make being an advocate for you a logical next step – you may have to go a different route.

Finding someone that you can show the product to, who can see the real value (potential) in it, and is willing to share their perception of the product (sometimes for a what amounts to a fee) with your potential customers can go a long way.

You might have to give them or their customers access to your product at no charge in order for them to see the value in your product, but it’s probably worth it at first.

Or you might have to “sponsor” research that – fingers crossed and breath held – comes out in your favor so you can distribute the research to your prospects. Trusted analysts can “endorse” you without actually endorsing you. What a world.

And of course there’s the celebrity endorsement route… think about what happens when Tim Ferris or Oprah mention a product. But that “celebrity” has to be someone that jibes with your Ideal Customer, otherwise it really won’t have the desired effect.

Kim Kardashian shilling for your project management app may not give you the result you want.

]]>http://sixteenventures.com/social-proof/feed5http://sixteenventures.com/social-proofCustomer Success Starts at Sales Done Righthttp://feedproxy.google.com/~r/SixteenVentures/~3/IAECVjYfse8/customer-success-sales-done-right
http://sixteenventures.com/customer-success-sales-done-right#commentsTue, 23 Jun 2015 05:51:02 +0000http://sixteenventures.com/?p=5596After getting a demo of their new product from their Chief Data Officer (Luke Deka) while I was in Poland, I was excited to catch-up with Greg Pietruszynski, CEO of Growbots, when I got back to San Francisco. We talked about lots of different topics, but the post that my friend Steli Efti from close.io […]

]]>After getting a demo of their new product from their Chief Data Officer (Luke Deka) while I was in Poland, I was excited to catch-up with Greg Pietruszynski, CEO of Growbots, when I got back to San Francisco.

Greg said the post was a brilliant summary of tactics that can help you focus on the right customer segments and therefore decrease long-term customer churn.

But then he said something that I thought would make a great post… it’s one thing to know who to sell to; it’s quite another to actually make the sale.

It’s yet a another to make the sale with Customer Success in mind.

Luckily, Greg agreed that this topic would make a great post.

I have a few things to say in the After Word about how churn hurts your Total Addressable Market, but until then, take it away Greg.

Customer Success Starts at Sales Done Right

At growbots.com we help SaaS companies create high quality sales funnels, so I decided to describe most common sales mistakes that lead to losing customers, that could’ve been retained otherwise.

There are a Limited Number of Companies that Will Buy your Product

How many customers will buy your enterprise package? The truth is that there is a very limited pool of potential clients, that could become your most valuable customers, generating most of your profit (as the 80/20 rule says). And those customers rarely come from inbound sources, which means you have to reach them first.

To be blunt – your long term revenue and profits depend on how good you are in reaching those customers and closing deals with them. The more prospects you lose, because of bad treatment or poor strategy, the less Monthly Recurring Revenue (MRR) your company will see during its lifetime.

Let’s say you have a 1000 companies targeted and the average outbound sales channel gives you a 5% response rate. How many out of those 50 companies will become paying customers? Looking at an average outbound sales funnel conversion rates you should expect around 5 paying customers.

Just 5 customers out of a thousand companies – that’s an incredibly low conversion rate. It’s still incredibly low even if you double or triple that number.

Choosing the Wrong Metric

The situation described above happens if you focus on the wrong metric. Most startups work under a huge growth pressure, so no wonder some of them myopically disregard conversion rates and think that they just need to reach out to more customers in order to meet their sales targets.

That might work in the very short term, but after a couple of months there is nobody left on the “sales ideas” list because you already contacted everyone! It’s not a bad dream scenario, but reality where your short term sales victories become a reason of your long term failure. What you should do instead is convert more companies into paying customers, even if it takes much more time.

Often people tell me: “You know what? We’re really trying hard to personalize emails, we spend lots of time on proper lead qualification, but the conversion rate is only 50% higher”.

The problem is that they don’t realize they focus on the wrong metric! What matters is how many customers you DIDN’T LOSE because you annoyed them with your SPAM.

If you really care about their problems, spend time analyzing challenges they face, etc. then in the worst case scenario you will simply hear: “Thanks for your email, but it’s not the right time”. Nobody gets angry, nobody puts your message into the SPAM folder. The contact is not lost and you can still close the deal with that company when the time is right.

It usually takes much more time than just sending an email.

Not Qualifying Prospects Before Contacting Them

“Positive answers” are great, but are not all equally good. Getting a lot of interested customers will only bring you success if they match your perfect customer profile. Steli already elaborated on the importance of focusing on the right customer, so I’ll only add: getting on a phone with an interested customer only to learn he won’t make a great customer is a waste of time.

At growbots.com we always qualify all prospects before performing outreach activities, which helps to decrease the amount of work spent on trying to close a deal with a lead that is bad fit to a minimum. Your sales team should also do that – otherwise you will always waste time on talking to the wrong people. Take better care of the most promising customers instead.

Using Ready-to-Use Templates

Ready to use sales templates are the best way of saying: “I don’t care about you enough to even take the time and write the email myself”. Do you think that using a template from “Predictable Revenue” (don’t get me wrong – it’s an awesome book and you definitely should read it) is a great idea? Believe me – the person you want to reach out to already knows this template.

Not because they read the book, but because they saw it in their inbox not once, but like 20 times, the same pitch repeated ad nauseam! It was super-efficient before Aaron published it in a book, but now it’s just another copy & paste email template you can find on the internet.

And boy do people hate those.

You have to write your own emails and make them uniquely about your customers challenges.

Customer Success starts with first impressions – nobody will believe in the standard of your services, if you won’t show that you care about their individual problems.

Directly Pitching the Product

“Hey, I don’t care that you are busy – please leave everything and think about buying a new project management tool. The best time to make that decision is now! Our software will help you to [insert sales pitch]. Ok, that’s all. How about you postpone all your plans for tomorrow 2:00 pm and get on the phone with me (so I can close that deal asap)?” – this is what I get from most of the “sales pitches” I receive in my inbox.

You can also find those long letters from a person who’s claiming they know everything about my problems, without even talking to me for a minute – yet they know I should buy their product.

Well, all those people haven’t yet realized, that actually… even direct sales activities are not about selling the product in the first place! The process leading up to a purchase decision for most SaaS products takes a few weeks, involves couple of decision makers, competitors evaluation, testing the ROI and budgeting.

There’s plenty of time for you to start a relationship with your potential customers. Try to provide any sort of feedback they might find useful, give advice or simply ask “how are you doing?” – whatever you do is better than just pitching the product. This way you can learn more about their business and gain their trust.

You will know more about their needs and your potential customers will remember that you’re trying to help their business, which means they’ll come back to you when the time is right.

Being patient and not pushing too much will help you to convert way more than 0,5% (or 5 out of a 1000) of companies into paying customers.

Summary

At growbots.com we often experience 100% email open rates and over 25% of positive answers – it’s really worth stopping spamming people and taking a quality approach instead.

And yes – we send automated emails, because automated doesn’t mean low quality and poor performance. In your outbound sales activities you should focus on long term revenues and not ruin the first impression with an impersonal, direct sales pitch spam.

Smart companies gradually convert their list of target companies into their customer base, because they know the number of their potential customers is limited.

The most important metric in the direct sales process is the conversion rate from a sales opportunity to a lost opportunity. The fewer opportunities you lose short term, the more MRR you can drive long term.

You should care about every potential customer, as if they already were your customer.

About Greg Pietruszynski

Greg Pietruszynski is CEO and co-founder at Growbots, a 500 Startups company. Growbots’ goal is to create A.I. for Sales. Greg is a serial entrepreneur, he was running 3 companies in China & Europe before Growbots and developed more than 200 different web/mobile products over last 6 years. He’s an automation freak and growth geek. Follow him on Twitter @pietruszynski

After Word by Lincoln

Churn is a big problem and can significantly hurt your Total Addressable Market (TAM). Think about it, churn reduces the number of potential customers when you burn through potential customers by selling to them when you’re not ready to help them achieve their Desired Outcome.

It’ll be difficult – if not impossible – to get them to give you a try again if you burned them in the past.

But churn does even more to reduce your TAM – it’s really the gift that keeps on giving – including hurting your reputation (which becomes a drag on new customer acquisition and therefore growth) as well as making investors see your company as risky which hurts your ability to raise funds (at least in a way that’s favorable to your stakeholders).

Remember… the seeds of churn are planted early, and it’s often during the sales process that those seeds are sown en masse.

]]>http://sixteenventures.com/customer-success-sales-done-right/feed3http://sixteenventures.com/customer-success-sales-done-rightAchieve Network Effect on a Smaller Scalehttp://feedproxy.google.com/~r/SixteenVentures/~3/apNcwVU1dI8/network-effect-smaller-scale
http://sixteenventures.com/network-effect-smaller-scale#commentsTue, 23 Jun 2015 02:49:57 +0000http://sixteenventures.com/?p=5593I was talking to my friend Piotr Zaniewicz the other day about the importance of network effects on SaaS businesses. I mentioned how the common misconception around network effects is that, in order to achieve a real network effect (this is the reason some people say B2B SaaS can’t be “viral”), the level of critical […]

]]>I was talking to my friend Piotr Zaniewicz the other day about the importance of network effects on SaaS businesses.

I mentioned how the common misconception around network effects is that, in order to achieve a real network effect (this is the reason some people say B2B SaaS can’t be “viral”), the level of critical mass necessary for network effects to take place usually requires a lot of time, effort, energy, and resources to develop, on top of that ‘mass’ of users and customers.

But Piotr, the CEO of RightHello, an outbound sales startup based in Poland, and I know different. We started talking about this really awesome way he came up with to generate network effects, but on a small-scale. This is exactly what he did for his company.

I told him – as I do – to write it down and let’s publish it so everyone can learn about it. He obliged and his post is below.

I have a couple of notes and some more resources for you at the end that you’ll want to read, but for now… take it away Piotr.

Achieve Network Effect on a Smaller Scale

Network effect is the holy grail of every startup. Happy clients recommend you, adding more clients (in consumer market however you go “viral”). The basic idea is that each new user brings 1+x more along, and you start to experience organic growth.

We all read stories about Dropbox and Slack, yet it seems more like magic than something you could repeat.

And if you counted on a step-by-step how-to-guide here, I’m afraid you’ll be disappointed; there is no proven or repeatable way of achieving that. There are too many factors, starting with a great product or service.

Though there are strategies that might help you achieve it.

In RightHello we managed to achieve a network effect on a small market of about 1000 companies and I wanted to share things we did right. I’ll spare you dozens of those we did wrong.

Niche = Tribe

Even if you can sell to most b2b companies (stuff like invoicing software) there is always a smaller market where it works better or it’s easier to acquire a customer. Lincoln built his Ideal Customer Profile framework around this idea.

A good niche is a set of people or companies that know themselves pretty well. Similar companies find ways to talk to each other. Through social media, discussion boards, magazines, they keep in touch. In smaller circles, everyone knows everyone.

Good example of a niche are startup founders – they read similar media, they know each other, they communicate on discussion boards and conferences. They are a kind of tribe that understands a lot of things in a similar way.

But this tribe is massive – let’s say there are about 100.000 startup founders out there. There is a little chance that CEO of an early-stage B2B saas from Berlin knows guys that just created a fitness app in San Francisco. So if you have a tribe this big it’s a good idea to narrow it down – by industry, type of business or location.

Startup founders from London for sure know each other better and communicate more frequently. The same goes with companies within a certain niche – let’s say sales support. From my experience good tribe to start with has from 1000 to 10.000 people/companies in it.

In our case we chose a niche of Polish IT companies (services & products). As IT market here is still quite small (but growing quickly), we could estimate that there are about 1000 companies that could be our customers. And the best part is that Polish IT companies know themselves very well and communicate frequently.

Signing First Deals

To start closing deals in a new segment, you have to build trust. It’s hard because you can’t show any results for similar companies in your portfolio yet. What you may already have won’t help much as well.

The easiest way to get your first customers in a new market is by approaching your closest network, where people already trust you just for who you are. If you don’t know anybody from the tribe, the best way to start is to ask your network for introductions and referrals.

If you don’t have anyone that could introduce you to first customers, just start marketing and selling, but be prepared that it will be tough. Without knowing what’s important to decision makers in a given segment, it’s hard to get them onboard. You need a few early adopters who trust you for who you are, not what you do.

And give you honest feedback.

Our first customers here were companies that I know (and they knew me) pretty well. I also pitched a few times on local startup events – there are always plenty different people there and it’s likely that you will find somebody that would be in your target audience.

Get first case study ASAP

Next milestone is to build your portfolio and get your first case study with a company from the tribe. The reason why is quite obvious – if you can show that you helped a company your future clients can identify with, you will build trust. And close new deals easier and faster.

There is a not-so-obvious reason as well – if you already have a customer that you brought value to, you will be more confident while selling your product. It’s a milestone in your head as well.

This part is the trickiest one – even if your product is proven on other markets, there will be problems you can’t predict before working with new clients. You will have to test and measure and most of all improve over time.

It took us two months to finish our first case studies, with clients who loved our service and had a lot of connections (big thanks to Tomek Karwatka from Divante!).

Effects on sales were amazing:

we started to get leads from recommendations

we closed more deals, faster – to deal with objections, we would show a case study and say “talk to this guy, he is similar to you and he was very happy with our services”.

Your first advocate, that you know will talk about positive results to whomever you point to, is a game changer in B2B deals. Especially if you don’t offer free trials and each new customer has to pay something upfront (back then this was our case).

Don’t forget to show non-believers that you did your homework. It’s wise to come back to clients whom didn’t want to buy first due to lack of track record. Show them those successful case studies. It might change their mind.

Direct Sales and Marketing

Now should be the time you can invest in marketing and sales with much bigger ROI than before proving yourself. You know where the leads are, what to do to make’em happy and you have proof of how well you do business.

If you chose your target audience well you shouldn’t have a problem with choosing a channel to start with.

As we could list almost every company from our target audience, we just started cold emailing almost every of them. Once we let them know we’re here and eager to solve their problems, they started discussing whether to try us out.

And of course they reached out to companies we had in our portfolio (pro-tip: be sure that if you listed somebody’s brand on your site you actually did great work for them. They will be asked about you by other companies).

Of course, this is not the only way – maybe events and conferences will work better for you (but before going to one read this). Or paid media, content marketing, twitter ads etc.

Cold Email Hack

To get more conversion from our sales at the start, we did a little hack by reaching out to people who knew companies from our portfolio.

We just went on LinkedIn and checked our portfolio clients employee networks. When we see somebody from a company in our target audience in his network, we just approach them and use our client name in the email. It’s stalkerish, but also effective and that’s the only thing that matters.

Magic Happens

With every new prospect approached and every new deal closed we started getting more and more inbound leads and referrals. We only needed a bunch of happy customers and dozens of companies that knew about us. Had we gone to a bigger market (for example whole Europe), it would have been much, much tougher. In terms of footprint big enough to create small network effect, 10 customers from Germany + 10 from Poland have a totally different effect than 20 from Poland.

After some time, when somebody asks for a lead generation company on a polish IT discussion board, there is always somebody that points to us. Then we could focus on markets other than Poland (we have customers in 11 now), because a stable number of leads from Polish IT simply comes in every month.

There is a drawback here though – with every new market we are heading into we need to do the same job almost from the beginning. But with the scenario I just showed you it gets much easier.

If you would like to learn more, I recommend a book entitled ‘Crossing the chasm’ by Geoffrey Moore. I think it’s a must-read for all technology entrepreneurs and an inspiration for me in choosing a go-to-market strategy. If you’d like more about those aspects after reading Mr. Moore I’d suggest to try Seth Godin.

In the end, there is one last piece of advice:

Don’t Screw It Up

If you won’t manage to provide a value, have poor support or just screw something up, you can spoil your network effect. As you chose a small tribe of people and companies, few unhappy customers could kill your sales.

A mistake can happen to anyone, so if you mess it up – do everything you can to fix it. Offer discounts, give money back, improve your product, do whatever it takes to make them smile again. Negative opinion will cost you money, happiness, health and your last shirt.

But if the customer sees that you are more sad than him and that you are doing everything to make the sun shine again, you can win him back.

About Piotr Zaniewicz

Piotr Zaniewicz is Founder and CEO of RightHello and loves Startups, marketing and product development. Follow him on Twitter @piotrzaniewicz

After Word by Lincoln

This is a great example of using an Ideal Customer Profile – one heavily weighted on the Advocacy Potential input – to drive results. Sometimes, to grow big… you have to think small.

]]>http://sixteenventures.com/network-effect-smaller-scale/feed2http://sixteenventures.com/network-effect-smaller-scaleLinks for 2012-09-17 [del.icio.us]http://feedproxy.google.com/~r/SixteenVentures/~3/Iu1IdxyTOu8/sixteenventuresTue, 18 Sep 2012 00:00:00 PDThttp://del.icio.us/sixteenventures#2012-09-17<ul>
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</ul><img src="http://feeds.feedburner.com/~r/SixteenVentures/~4/9bYZ8hZHR88" height="1" width="1" alt=""/>http://del.icio.us/sixteenventures#2012-07-02Links for 2012-06-29 [del.icio.us]http://feedproxy.google.com/~r/SixteenVentures/~3/e42QMX4sKXw/sixteenventuresSat, 30 Jun 2012 00:00:00 PDThttp://del.icio.us/sixteenventures#2012-06-29<ul>
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To resolve this issue, log in to the server with the account that was used to install vCenter Server and rerun the View Composer installer.
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